On the competitive facility location problem with a free choice of suppliers

We consider a mathematical model from the class of competitive sequential facility location problems. In these problems, the competitors sequentially open their facilities, and each side aims to ‘capture’ the consumers and maximize its profits. In the proposed model, we consider a situation of a ‘free’ choice by each side of an open facility to service a customer. The model is formulated as a bilevel integer programming problem. We show that the problem of finding an optimal noncooperative solution can be represented as a maximization problem for a pseudo‐Boolean function. We propose an algorithm for constructing an admissible noncooperative solution for fixed values of the variables in this pseudo‐Boolean function. We also propose a method for constructing an upper bound on the maximal value of the pseudo‐Boolean function on subsets of solutions defined by partial (0, 1)‐vectors.